Exam 3: The Adjusting Process

The accounting records of Patricia Event Planning Service include the following select unadjusted balances on 31 December 2016: Salaries expense,$6,000;Service revenue: $20,000;Unearned revenue,$400;Supplies expense,$600;Rent expense,$300;Depreciation expense-equipment,$200. Later in December,she worked with a new client and provided event planning services for an upcoming event.When the event is complete in January 2017,she will collect the full amount of $2400 from her client.As of the end of December 2017,she rendered one-third of the services covered by the contract.She made the accrual adjustments.The final adjusted balance of Service revenue,as shown on the adjusted trial balance,should be a:

Overstating expenses could be an unethical strategy used to improve the profit result.

All of a company's accounts and their balances appear on the:

A business acquired equipment for $135,000 on 1 January 2017.The equipment will be depreciated over five years of its useful life using the straight-line depreciation method.The business records depreciation once a year on 31 December.Which of the following is the adjusting entry required to record depreciation on equipment for the year 2017? (Assume the salvage value of the acquired equipment to be zero. )

Under accrual basis accounting,an expense is recorded ONLY when the cash is paid out.

Entries that record cash paid out before the expense is incurred are:

Smith Technical Services is working on a six-month job for a client,starting on 1 February.They will collect $20,000 from their customer when the job is finished.On 1 March,their Accounts receivable account had a debit balance of $4000.At the end of March,after monthly adjusting entries have been made,what will be the balance in Accounts receivable?

A contra account has two characteristics: (1)a contra account is paired with its related account and (2)a contra account's normal balance is the same as that of the related account.

Profit from the income statement is reported in the assets section of the balance sheet.

On 1 January 2017,the Accounts receivable of Linda Company had a debit balance of $170,000.During January,the company provided services for $400,000 on account.The company collected $240,000 from its customers on account in January.What was the ending balance in the Accounts receivable account at the end of January?

In the case of a prepaid expense,the adjusting entry required at the end of a period consists of a debit to Prepaid expense.

ABC Company signed a one-year $48,000 loan payable at 8% interest on 1 May 2017.If ABC only adjusts their accounts once a year at year-end,how much interest expense was accrued on 31 December 2017?

Accrual accounting requires adjusting entries at regular intervals throughout the accounting period.

If a company is using the cash-basis method of accounting,when is revenue recorded?

Smith borrowed $24 000 on a one-year Loan payable with an interest rate of 10% per year on 1 June.He will repay the principal and interest at the end of the one-year period.Smith makes accrual adjustments at the end of each month.He should record interest expense of $2 400 on 30 June.

On 1 January,Smith had $2 500 of supplies on hand.During January,Smith purchased $6 000 worth of new supplies.At the end of the month,a count revealed $800 worth of supplies remaining on the shelves.The adjustment entry needed will include a debit to Supplies expense of $7 700.The supplies were initially recorded as an asset.

The financial statements should be prepared in this order: 1)income statement,2)balance sheet and 3)statement of changes in equity.

Ursula Tax Planning Service has the following plant assets: Communications equipment: Cost,$3840 with useful life of 8 years;Furniture: Cost,$17,280 with useful life of 12 years;and Computer: Cost,$13,440 with useful life of 4 years.Assume the salvage value of all the assets is zero and the straight-line method is used. Ursula's monthly depreciation journal entry will include a:

Henry Tax Planning Service bought production equipment for $9600 on 1 January 2017.It has an estimated useful life of five years and zero residual value.Henry uses the straight-line method to calculate depreciation and records depreciation expense in the books at the end of every month.As of 30 June 2017,the book value of this equipment shown on Henry's balance sheet will be:

If a company is using the accrual method of accounting,when is revenue recorded?